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If a controversial piece of legislation in Chile is passed, gold mining could be brought to a halt. Couple this with a difficult situation in copper and the country could lose its luster as a mining haven.

The country has revived a bill that's directed at the heart of Barrick Gold , the world's largest gold miner whose Pascua Lama project has been a lightning rod for controversy. Located high in the Andean mountains, the mine's critics contend the operation jeopardizes local water supplies because it delves into glaciers. Since mining is such a water-intensive effort, indigenous tribes have opposed allowing the project to expand because of fears it will contaminate their glacial water supplies, upon which they're heavily dependent.

Source: SXC.hu

Pollution concerns have already stalled the $8 billion Pascua Lama project, and the new bill, which would broadly expand what the definition of a glacier is to include the frozen permafrost around it, could effectively kill it.

Although we may have mental images of what constitutes a glacier -- e.g., mountain upon mountain of compacted ice floes -- in the Andes it's a little different as the region is made up mostly of rock glaciers, a rock-like crust with a massive core of frozen ice. Argentina passed a law several years ago that was supposed to be a death knell for Barrick, as Pascua Lama straddles Chile and Argentina, but the miner challenged the constitutionality of the law and a federal judge suspended its implementation. The matter now resides before the Argentinean supreme court.

There's no way of knowing how the court will rule, though if its decision in Goldcorp's El Morro copper-gold project is any indication, it doesn't look good. As local tribes opposed the project on environmental concerns, the court suspended Goldcorp's permit to mine, which forces it to now solicit the consent of the local communities affected by its project and then submit the entire plan for environmental approval all over again.

Environmental concerns also sunk Newmont Mining's Minas Conga gold project in Peru after environmental concerns were also raised. The government has put the project on the "back burner" now and $2 billion in estimated annual gold production is gathering dust.

Chile is the bigger fish to catch for Barrick, though, and passage of the law here could have more serious repercussions. While the courts upheld Chile's blockage of the project going forward, it didn't rescind Barrick's permit letting it cling to hope.

Pascua-Lama is one of the world's largest gold and silver resources, expected to produce an average of 800,000 to 850,000 ounces of gold and 35 million ounces of silver in its first five years of operation, and it has an expected mine life of 25 years. It's said to possess nearly 18 million ounces of proven and probable gold reserves and 676 million ounces of silver.

Copper projects are also jeopardized, with even the state-run Codelco coming under pressure at its $6.8 billion Andina 244 expansion project, which is also surrounded by glacial permafrost. It also opposes the new glacier law, and you'd think it would have the inside track on getting it pushed one way or the other, but balancing the economic development and wealth the mining operations brings to the indigenous people is still being weighed against the environmental hazards the projects represent.

Depending on which way the issue calves off, Chile's miners could soon find themselves in a deep freeze.

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